Sunday, November 18, 2012

TSA delays rate increases

The Transpacific Shipping Association (TSA) is a not a conference (those are now illegal), but a
"rate discussion agreement".   Carriers who belong to it are allowed to share certain information,
and to discuss certain things regarding rates.   I am not sure what they can discuss, I think just
general things, not about specific customers.

Anyway, the administrator of the TSA keeps trying to "herd cats", getting all the carriers to
go in the same direction regarding rate increases, policy matter (ie; providing chassis), etc.
Of course if the TSA falls apart the administrator and staff will be out of a job, so they are
doing everything they can to demonstrate the need for their existence.

They have just issued new contract guidelines, delaying the previously announced rate increases
for contract negotiations.

Here it is.....

Managing Market Uncertainty
Sustained volatility in the Asia-US cargo market has delayed development of TSA's annual service contracting program for 2012-13. U.S. economic and retail indicators have remained uncertain, but suggest steady, gradual longer-term improvement in the coming year. As a result TSA lines delayed announcing a formal program of revenue/cost recovery guidelines until February 2012.
In the runup to May 1, 2012, when most new Asia-US service contracts take effect, TSA lines have recommended a schedule of interim, across-the-board rate adjustments aimed at restoring freight rates in the trade to roughly May 2011 levels, as a baseline for subsequent contract rate negotiations going forward. Interim increases include:
- US$400 per 40-foot container (FEU), effective January 1, 2012, with proportionate increases for other equipment sizes, for all tariff and applicable contract cargo.

- US$300 per FEU, effective March 15, 2012, for all tariff and applicable contract cargo.

- US$400 per FEU, effective April 15, for all remaining rates below May 2011 levels.
In addition TSA has announced its 2012-13 guideline revenue program, to take effect no later than May 1, 2012 for all carrier tariffs and service contracts.
Member lines have recommended that new baseline rates be raised by a minimum of US$500 per FEU for cargo to the U.S. West Coast, and a minimum of US$700 per FEU for all other destinations. Additional revenue and cost recovery initiatives will be considered later in the year, after a review of market conditions and outlook for the second half of 2012.

Carriers have further reaffirmed the need for 2012 service contracts to apply per formula rate increases for all equipment sizes, and to provide for collection of full, floating fuel surcharges and other applicable cost-based ancillary charges.
Finally, TSA lines indicated that they intend to apply a peak season surcharge (PSS) later in the year, with a duration and at an amount to be determined based on market conditions approaching the traditional summer and fall peak period.
The overall objective is to ensure carrier viability and service stability in a highly competitive and service-intensive freight market, by a) restoring rates to a baseline of a year earlier and then b) building on that platform in upcoming contracts to cover rising costs; to permit reinvestment in services and operations; and to provide a reasonable measure of profitability.

They say a lot more  boring things regarding how they came up with their formulas etc., trying to
convince either the carriers or their customers (or both, I guess), that they are doing a good job.

I presume what has happened is carriers have "broken ranks" on the previous agreed rate
increases and now the other carriers (through the TSA) are giving the impression the offending
carrier can now right the wrong.

What will really happen is all the carriers will try to get as much business locked up before the
new deadline, and then apologize later.

I guess they still haven't figured out it's all about supply and demand.  Rather than talking about
raising rates, they should be talking about decreasing tonnage.


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